In my email this morning from Charles Schwab at 7 a.m.:
"Learn about Schwab's Securities Lending Fully Paid (SLFP) program, which may allow you to earn monthly income for lending securities to Schwab that are in high demand by other investors. Your account currently holds securities that may qualify for the SLFP program.
Please note that income paid on a loaned security can fluctuate with changes in demand in the securities lending market.
Learn More
Why does Schwab want to borrow your securities?
With your permission, Schwab can lend your securities to other clients or financial institutions to facilitate their trading strategies, which typically involve a short sale. While participating in SLFP, you still own your shares and retain the right to sell or remove the shares from the program at any time.
Other benefits of the SLFP program:
• Income accrues daily and is paid monthly.
• You'll receive 100% collateral for loaned securities.
• You can participate at no cost to you.
What are some of the potential risks and important considerations of participating?
Security price. There is the potential for downward pressure on the price of a security if the security is borrowed to facilitate a short sale.
Dividends. If you have a security on loan to Schwab when it's scheduled to pay a dividend, you will either receive the dividend or a substitute payment in lieu (PIL) of dividend. You may have to pay a higher tax rate on a PIL, but Schwab currently issues a discretionary payment to help compensate for additional taxes.1
Voting rights. Upon lending a security to Schwab, you will lose the right to vote on corporate actions by the issuer.
Loss of SIPC protection. Because borrowed securities may not be covered under the programs of the Securities Investor Protection Corporation (SIPC), loans are secured by collateral provided by Schwab.
To learn more about the program:
• Visit schwab.com/securitieslending
• call us at 877-793-8872, Monday through Friday, 8:30 a.m. to 4:00 p.m. ET.
Thank you for investing with Schwab."
